与讲师见面

Antoine Flahault

Professor of Public Health and Director of the Institute of Global Health (Faculty of Medicine, University of Geneva) and co-Director of Centre Virchow-Villermé (Université Paris Descartes)University of Geneva and Université Paris Descartes – Sorbonne Paris Cité

Rafael Ruiz De Castañeda

Institute of Global Health - Faculty of MedicineUniversity of Geneva

Defeating Ebola Together Week 3: Ebola's Impact
"How are the Costs of the Ebola Epidemic Measured? Concepts in Practice"

Let's look more closely at the two methodologies used by

the World Bank to assess the economic costs of Ebola.

We'll start with the sector-by-sector analysis of economic growth.

There are a certain number of

key indicators -- for instance, cement production,

fuel sales, tourist arrivals --

that are highly correlated with various sectors of the economy.

In fact, economists often use energy consumption and volume of cement sales to estimate the size of

a country's underground, or shadow, economy, because these figures yield very strong statistical correlations.

In these three countries, especially in

Liberia and Sierra Leone, there was a sudden and dramatic fall of

these indicators beginning in April/May of 2014:

cement sales, fuel sales and tourist arrivals.

Obviously, these three indicators are not flawless.

But cement sales are correlated with the activity of the construction sector, and hence with the service industry among others.

Tourist arrivals are strongly correlated with the portion of the GDP produced by the tourism industry.

Fuel sales are associated with transportation, and hence with economic activity as a whole.

Let's look at some of the actual figures.

In Liberia, agriculture is a crucial

component of the GDP. Before Ebola, the annual growth rate

of the agricultural sector in Liberia was projected to be 3.5%.

To get a sense of what this means, for those of you unfamiliar with these indicators,

we use what is called the "rule of 72."

If agriculture is growing, say, at an annual rate of 3%,

you take 72 divided by 3, and that tells you that the agricultural sector will double in size in a span of 24 years.

Since Ebola, however, the annual growth rate of Liberia's agricultural sector is now estimated at 1.3%.

So from 3.5% it's gone down to 1.3%. In other words, the growth rate has been divided by 3.

In other industries, such as mining,

manufacturing and services, growth estimates have been

reduced in similar proportions.

Now, when you look at what this means in terms of lost GDP, surprisingly,

the numbers -- at least in the short-term, for 2014 -- are relatively low.

I'll cite the estimates issued by the World Bank.

In Liberia, the GDP is expected to fall by some $66 million.

In Sierra Leone, by $163 million and in Guinea, by $130 million.

So that's the first methodology, based on sector-by-sector analysis.

Now let's move on to the second methodology, which uses CGE modeling, or Calculable General Equilibrium modeling.

Here the World Bank used two models,

because there was only one country-level model applicable to Liberia, called the MAMS model.

They then created another simulation, based on

12 West African countries (including, of course, the three countries struck by Ebola) and six industrial sectors.

So what exactly are CGE models? They are stylized models of an economy, the most sophisticated of which include hundreds of sectors,

in which the behaviors of consumers and businesses are modeled,

as are all the interactions and exchanges -- through the labor market, the capital market, international markets, transportation, etc. -- that connect these different sectors.

How, then, is a CGE model used to evaluate the impact of Ebola? It's quite simple.

It is assumed, in these models, that Ebola has three impacts.

1) It has an impact on the labor supply.

Using the example of agriculture, fewer people will cultivate their land.

Or, in manufacturing, factory workers won't go to work.

2) It is assumed that the utilization rate of capital will be negatively affected.

There will be less use of machines, for instance.

3) It is assumed -- and this is probably one of the most important factors in terms of Ebola -- that Ebola will increase

what economists refer to as transaction costs, particularly with respect to international trade and transportation.

So you take these three impacts and use them to "shock" the model:

you estimate what the GDP would have been, by country and by sector, had Ebola never happened.

Then you see what the model yields when you input the impacts of Ebola, and you compare the results.

When entering these "shocks" -- to the labor supply, to capital utilization rates and to transaction costs -- into the model, the researchers design them

so that the model will reproduce the sector-specific impacts identified by the first methodology.

So, by design, the results yielded by both methodologies are consistent, but the CGE models have the added benefit of providing

an overview of the interactions among different sectors.

So what are the actual figures?

The World Bank has issued two series of estimates based

on two epidemiological scenarios.

In the "Low Ebola" scenario,

you have about 10,000 deaths, assuming a mortality rate of 50%.

In the "High Ebola" scenario, you have about 100,000 deaths, again using a 50% mortality rate.

When you look at the impact in terms of lost GDP in

all three countries, aggregating the figures,

the estimated total loss, in 2014, for Guinea, Sierra Leone and Liberia together is $359 million.

In 2015, if the epidemic is contained ("Low Ebola" scenario),

the figure is projected to reach $129 million, which is not insignificant but still relatively limited.

On the other hand, if the spread of the disease stays strong,

the total loss would reach $815 million which,

given the margin of error, comes quite close to $1 billion.

Of course, these figures -- including the loss of $815 million in the World Bank's "High Ebola" scenario -- are estimates

that only take into consideration direct and indirect economic costs.

Yet there are other factors which could create potential costs for these countries.

As you know, Liberia and Sierra Leone are recovering from fairly recent civil wars, and very deadly ones at that.

There is a large body of research in economics and political science

focusing on the factors that determine whether or not a country is likely to descend into civil war.

One of the key factors in this determination is GDP growth.

This implies that if there is

social unrest -- let's hope it won't degenerate to the point

of civil war -- if we see social unrest and riots,

the situation is liable to snowball, as the slowdown in growth caused by

Ebola will create social problems, which will inhibit growth even further.

Depending on the methodology, estimates of the economic costs of Ebola

range from approximately $100 million to $800 million for 2014 and 2015 in the three countries most affected by Ebola.

Yet it is important to keep in mind that other, additional costs could potentially arise from the political destabilization caused by the impaired growth of these countries' economies.